Spain scraps 'sun tax' in measures to cool electricity prices

Spain's Energy and Environment Minister Teresa Ribera arrives for a cabinet meeting at the Moncloa Palace in Madrid, Spain, July 6, 2018. REUTERS/Juan Medina

By Isla Binnie and Jose Elías Rodríguez

MADRID (Reuters) - Spain took measures on Friday aimed at reducing electricity bills which are among the highest in Europe and are often criticised for reducing business competitiveness and consumer's purchasing power.

The government will scrap a controversial levy on solar power affecting households and small businesses, Energy and Environment Minister Teresa Ribera said, making it easier for consumers to erect panels for their own use.

"This country is finally freeing itself from the great absurdity, scorned by most international observers, that is the 'sun tax'," Ribera told a news conference.

"A key figure showing Spain's delay in this area is that a country so rich in sunlight has only 1,000 installations of this kind compared with more than one million in Germany," she added.

The toll applied to a system known as "auto-consumption", using installations with more than 10 kilowatts of capacity that were connected to the national grid.

Socialist Prime Minister Pedro Sanchez brought environment and energy together into a ministry when he toppled his conservative predecessor in June, to underline his government's commitment to environmental sustainability.

Spanish consumers pay the sixth-highest electricity prices in the European Union, according to Eurostat.

In the throes of an economic crisis in 2013, the previous conservative government cut subsidies for renewable energy in a bid to tackle a 28 billion euro ($32 billion) debt, known as a tariff deficit, built up by years of regulation which kept prices below costs.

Included in the reform was the 'sun tax', which put consumers off taking advantage of a plunge in the price of solar panels that has made them an attractive energy source in other countries.

Friday's changes, contained in a decree law, also included suspending for six months a 7 percent levy on power generation which utilities had mainly passed on to consumers.

Along with the suspension of a levy on hydrocarbon use for electricity production, this should cut average household bills by around 4 percent, Ribera said, adding, "It is a relief measure, which will give us six months to work on big structural measures."

With only a quarter of parliamentary seats, Sanchez has little room to implement deep policy changes, and has favoured high-profile measures aimed at appealing to left-wing voters.

(Editing by Sonya Dowsett and Elaine Hardcastle)